New Jersey and the Modern Utility

New Jersey’s Energy Future

PSE&G for Politico

The modern utility faces a new reality: Our customers want – and need – enhanced reliability and resiliency. They want fewer service interruptions and, if the lights do go out, they want power restored quickly. That requires substantial investment.

Society also wants cleaner energy with lower emissions, to limit the effects of air pollution and to combat climate change. That requires more new investment.

Our customers want access to high-efficiency devices and appliances, as well as the ability to monitor and control their energy use to lower their bills. Fairness dictates that we find ways to make those devices and appliances – as well as cleaner energy – available to customers at all income levels.

At the same time, we must recognize that, for a large portion of our customers, the No. 1 concern is that we keep their bills affordable.

Today’s environment requires both utilities and regulators to think and act creatively to meet all of these needs. That means reforming the way New Jersey utilities are regulated. Regulators must remove the current disincentives for utilities to:

Energy efficiency is the single most important component that will drive the utility of the future. While New Jersey has set aggressive goals for renewable energy sources, we have only taken baby steps in the area of energy efficiency.

Energy efficiency delivers clean-energy benefits similar to renewable energy sources, such as solar or wind, at a fraction of the cost. If society’s goal is lower air emissions, then energy efficiency – improving lighting, replacing old heaters and coolers and even just caulking windows – is the most cost-effective tool to accomplish this goal. Moreover, energy efficiency plays a vital role in reducing customer bills.

PSE&G has invested approximately $330 million in energy efficiency programs. We have made energy efficiency improvements at more than 30 hospitals, saving them more than $11.5 million a year. Energy efficiency lowers their energy costs, allowing them to focus resources on new life-saving equipment and customer care. We could do more.

In the past, any energy savings enjoyed by customers cut into utilities’ revenues, creating a disincentive to invest in programs that reduce energy use.

More than two dozen states have adopted regulatory systems that ensure utilities can bring in enough revenue to keep energy grids running reliably and efficiently, no matter how much natural gas or electricity they sell.

Removing the disincentive for New Jersey utilities to encourage the spread of energy efficiency could unleash the power of the utility to lower bills.

Renewables

Even with a comprehensive energy efficiency effort, our customers will still need electricity for light, warmth and comfort. The cleanest options available are low- and zero-emitting resources such as nuclear energy and renewables.

In New Jersey, PSE&G has built 31 universal, larger-scale solar projects totaling more than 124 megawatts, which feed into the local grid and provide clean electricity to all of our customers. Overall, PSEG has invested more than $1 billion in solar energy. Grid-connected solar energy is the best way to minimize the cost of this all-important technology and, at the same time, allow the same customers who help support solar with incentives to enjoy its benefits as well.

Again, we would like to do more.

But even as we do more, it is critical that we do not take a huge step backward by allowing our nuclear plants to close, which would reduce reliability, dramatically increase emissions and cause bills to go up.

Universal Access to New Technology

The utility has long been required to make electric and gas service available to all customers, regardless of income level.

This mandate of “universal access” can extend beyond gas and electric service, and further encompass new technologies that promote greater efficiency, the ability to monitor and control energy usage, and promote cleaner energy, all in accordance with the utility’s longstanding role as its customers’ trusted energy adviser.

A utility, with its network and strong customer relationships, can be the ultimate sales channel for new, clean energy products and services, such as “smart” thermostats or electric vehicle charging infrastructure, and working with local business partners to make the installation of energy efficiency easy for the business or homeowner.

By playing this role, utilities can provide the “market pull” to help grow a new and important part of the New Jersey economy.

Reliability and Resiliency

At PSE&G, we are making our systems more reliable and resilient against extreme weather. We have done this by:

Raising substations flooded by Sandy;

Replacing gas mains – some close to 100 years old; and by

Rewiring and upgrading our transmission system.

Streamlining the regulatory process to allow long-term planning of these critical programs – as opposed to a cumbersome new filing process every 18 months to two years – will allow more effective planning, lower costs and more consistent job-creation.

Across the U.S., nuclear power is at risk. Economic pressure has led several nuclear plants to shut down or be scheduled for early retirement. If New Jersey’s nuclear plants were to close, it could negate the progress we are making toward cleaner air, enhanced reliability and lower costs.

Today, nuclear power provides 97 percent of the air emissions-free energy generated in New Jersey and supports more than 4,000 jobs in the state. Nuclear is part of New Jersey’s diverse energy mix – which helps ensure our electricity is reliable and affordable.

Without New Jersey’s nuclear industry, the state would be more reliant on out-of-state fossil fuels – leading to increases in both air emissions and energy costs.

Customers’ demands are changing. They want more reliability, they want more resilient power, they want cleaner energy and they want access to smart technology to better understand their energy usage – all while keeping bills affordable.

We need a new regulatory framework that permits long-term infrastructure modernization programs and recognizes utilities’ unique position to bring about change, while providing a framework that removes the disincentive utilities have to sell less electricity, create energy efficiency programs or partner with new companies to offer energy-saving products that lower bills and provide cleaner air.

If we do, we can use less energy, the energy we use will be cleaner and more reliable and, through energy efficiency, bills can remain stable.

No small challenge. But if we get it right, we have the opportunity to create a model for our nation – and, without exaggeration, for others around the world.